But such lobbying is not limited to India. The Academy Awards are known to be biased towards industry favorites. The lobbying is not meant to push actors and directors alone but to up the market for the film's distribution. Basically if you have a bunch of important awards attached to your film then you get to sell it for a higher price. That's it.

Edit: The selectors - "The Film Federation of India (FFI) is an apex body of the Indian producers (around 18,000), distributors (around 20,000), exhibitors (around 12,000) and studio owners, headquartered in Mumbai." These people are businessmen in the business of selling films, they don't care about art.The strongest, wealthiest producer will have his say and the rest (distributors, exhibitors etc) will follow because they want to make money. The only people they are representing are themselves, not the viewers or the country. But to be fair, people would have chosen Barfi as well :/